Post Office retains card account contract

Author: By Alan Jones, PA

Work and Pensions Secretary James Purnell told MPs the organisation would
retain the business, with a new contract running for five years from 2010,
with the possibility of an extension beyond that.

The decision was welcomed by subpostmasters and unions, which had warned that
3,000 branches would close if the work was given to a rival bidder.

The contract for the Post Office Card Account was put out to tender, with
PayPoint and another firm expressing an interest.

Mr Purnell said that in order to support a viable post office network, the
competitive tendering process had been cancelled.

“I firmly believe that this is the right decision for our customers, the Post
Office and sub-postmasters. The Post Office is a cherished national
institution at the heart of many communities.

“The card account is an important source of income, and brings customers
through the doors of post offices across the country.

“Global economic events have made people, particularly the most vulnerable in
our society, more concerned about financial transactions. The Post Office is
a trusted brand, and is seen as a safe, secure and reliable provider of
services in these turbulent times.

“Now is not the time for the Government to do anything to put the network at
risk, particularly as post offices are often the only providers of financial
services in remote areas.”

Around 4.3 million people hold a Post Office Card Account to obtain pensions
and benefit payments, including jobseeker’s allowance and child benefit.

Around £80m is paid out every day to account holders, with many of them
spending some of the money in post offices or shops run by subpostmasters.

The card accounts for one in four visits to post offices, rising to one in two
in rural areas and is regarded as a lifeline by workers in the industry.

Alan Cook, managing director of the Post Office, said: “We very much welcome
this decision, which enables us to achieve our goal of maintaining a branch
network of around 11,500 outlets for the foreseeable future.

“It’s great news for Post Office Ltd, for our subpostmasters and for our
customers. We will, of course, also be working with other Government
departments to drive a wide range of services through the network, while at
the same time building on our existing range of financial and other

Billy Hayes, general secretary of the Communication Workers Union, said the
announcement was “a victory for common sense”.

He said: “We’re pleased that, following months of extensive campaigning and
lobbying by our union, the Federation of SubPostmasters, MPs, customers and
all those who care about the Post Office right across the UK, the Government
has listened and made the right decision.

“James Purnell has shown good judgment on this matter.

“We hope that today’s decision represents a further indication that the
Government is now willing to adopt a more positive approach towards the
future of this vital public service.”

The union has also been urging the Government to use the full potential of the
Post Office to create a new Post Office People’s Bank.

Liberal Democrat work and pensions spokeswoman Jenny Willott said: “This
announcement comes as a huge relief to the millions of Post Office Card
Account holders, thousands of sub-postmasters and the countless communities
that may have lost their post office if the decision had been different.

“The Government has wasted time and money and caused immeasurable heartache by
dragging this process out for so long.

“This could all have been avoided if, as the Liberal Democrats have long
argued, the Post Office Card Account had never been put out to tender in the
first place.

“However, cancelling the procurement exercise is a peculiar means of arriving
at this decision and ministers have some explaining to do.”

The Federation of Small Businesses (FSB) also welcomed the decision, saying
that some sub-postmasters earned 20 per cent of their income from the Post
Office Card Account (POCA).

Spokesman Clive Davenport said: “This is welcome news and underlines the FSB’s
central campaign to Keep Trade Local. Many convenience stores in towns and
villages operate alongside a post office.

“Around £27bn is paid out each year to POCA customers and of that, £2bn is
spent in these businesses.

“The Post Office has an unrivalled geographical spread, particularly in rural
areas, and awarding the contract to the Post Office will help save thousands
of post offices, businesses and jobs.”

Shadow business secretary Alan Duncan described the decision as a “humiliating
climbdown for the Government, who have done everything they possibly can to
find a way of awarding it (the contract) to somebody else”.

Mr Purnell told MPs: “I recognise, of course, that this decision will
disappoint those other bidders who had reached the final stage of the

“I want to emphasise to the House, as I have done personally to the companies
in question, that my decision does not reflect in any way on their ability
to have provided the services in question.

“Nor is it a step we have taken lightly. We recognise the importance of
competition in the awarding of public contracts.

“But we have concluded that, in these current circumstances, protecting
vulnerable groups by preserving a viable post office network justifies the
award of a contract outside the competitive process.

“These are exceptional times, and we believe this is a proper and
proportionate response.”

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